How to play SBI after Q4 results miss estimate - Moneycontrol.com

Moneycontrol Bureau India's largest lender - State Bank of India  (SBI) shares tanked more than 8 percent on Thursday to close the day's trading at Rs 2,178 on NSE. The bank's fourth quarter (January-March, FY13) net profit slipped 19 percent year-on-year to 3,300 crore. However, analysts on an average, had estimated 12 percent fall in net profit. Also read: State Bank of India Q4 net falls 19%; provisions drag Traders who were apprehensive of the restructured loan book, pressed the panic button. However, analysts tracking the bank saw it as an opportunity to buy at every decline. SBI shares are expected to rise between 15-25 percent next one year. "The case of Sasan project loan recast did not go well with investors," said Manish Innani, director of a Mumbai-based brokerage - Prayas Securities. "It was a company owned by Anil Ambani, who is believed to have good amount of cash. He is one of the top five businessmen in India. SBI could have asked for promoter's funding instead of taking it to restructuring. This led to a belief that there may be more such cases of stress assets. When big gun falls, small ones are likely to follow," he said adding that the bank's net profit has been falling since last three - four quarters. Traders may also short SBI shares on Friday. During the January-March quarter, SBI restructured Rs 8,669 crore loans incrementally. This was a little higher than the market expectation of Rs 8,000 crore. Two big accounts including  Anil Ambani owned Reliance Power's Sasan project amounting to Rs 1,066 crore and Suzlon Energy's loan of Rs 1,600 crore were added to the restructured book during the three-month period. "Asset quality is expected to improve. The bank seems to have emitted most of the toxic elements from its book. Moreover, (share) valuation is also cheap. The stock should rise around 25 percent in next one year," said Saikiran Pulawarthi, a banking analyst from Espirito Santo Securities. Since last one year SBI shares rose more than 11 percent as against 37 percent spike in Bank Nifty - the broader index for banking stocks. In April this year, the bank management had announced to revive the process of merging its subsidiary banks. If this happens, it is likely to expand the bank's book massively. It has five such group banks. "Good improvement was seen on the NPA front with gross NPA in absolute terms declining 4% quarter-on-quarter. Provision coverage ratio improved sharply to 57.1% versus 52.5% a quarter ago, due to higher provisioning," Gautam Sinha Roy, VP Equities, Motilal Oswal Securities According to Vaibhav Agarwal, vice president research, Angel Broking; the lender has made adequate provisions on all counts. It is good for its long term health. The bank recovered good amount of loans. "The stock market reaction is more to do with the broader index, which dropped sharply on Thursday," he said adding that the stock would rise 15 percent in next one year. The 30-share Sensex on Thursday fell 387.91 points or 2 percent to close at 19674.33, after touching a low of 19634 intra-day. Meanwhile, its current chairman Pratip Chaudhuri will demit his office in September, 2013. Market is a bit concerned over the upcoming management change. "History shows, every outgoing chairman leaves his own legacy. The new boss always tries to undo those. Consequently, it reflects in the bank's book," said a market analyst citing the example of O P Bhat, former SBI boss. When he had retired and Pratip Chaudhuri stepped in his shoes, SBI profit margin plunged drastically in the initial few quarters. saikat.das@network18online.com via Business - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNHlDzU0ZZD3rxuyLgX_IAZIzehQCA&url=http://www.moneycontrol.com/news/result-analysis/how-to-play-sbi-after-q4-results-miss-estimate_879521.html

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